NYSE Modifies "Reverse Merger" Definition to Exclude Certain de-SPAC Transactions
The New York Stock Exchange ("NYSE") modified the definition of "reverse merger" to exclude specific de-SPAC transactions from its rule on listing reverse merger companies.
The change aligns NYSE rules with the SEC's "SPAC Final Rule and Guidance" "to enhance investor protections in initial public offerings by special purpose acquisition companies (commonly known as SPACs) and in subsequent business combination transactions between SPACs and private operating companies (commonly known as de-SPAC transactions)." The modifications would ensure that these transactions are subject to rigorous disclosure requirements and SEC review comparable to a traditional IPO. Specifically, the change to Section 102.01F ("Policy on Listing Reverse Merger Companies") of the NYSE Listed Company Manual treats a de-SPAC transaction by a SPAC trading in the over-the-counter ("OTC") market in the same way as a de-SPAC transaction with a listed SPAC. The NYSE noted that such transactions are the "functional equivalent of the private target company’s IPO."
The principal provisions of the modified rule include:
- Exclusion from Reverse Merger Definition: The amendment modifies Section 102.01F to exclude the securities of a special purpose acquisition company from the definition of a "Reverse Merger."
- Specific Criteria for Exclusion: To qualify for the exclusion, the SPAC must have been previously listed on a national securities exchange and subsequently traded in the OTC market.
- Registration Requirement: The listing must occur in connection with a de-SPAC transaction involving an effective Securities Act registration statement.
- Removal of Seasoning Requirements: By being excluded from the "Reverse Merger" definition, companies avoid the pre-listing requirements typically applied to backdoor registrations, such as trading for at least one year in the U.S. OTC market and maintaining a closing stock price of $4 or higher for a sustained period.
In addition, the modification specifies that the exclusion applies only if the SPAC provides its public shareholders with the opportunity to redeem or tender their shares in connection with the de-SPAC transaction for a pro rata share of the IPO proceeds.
The rule change was filed on January 29, 2026, and will become operative 30 days later.